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Strategy Compiling: Case Study: ZTE (A Chinese Telecommunication Co.)
Strategy Compiling: Case Study: ZTE (A Chinese Telecommunication Co.)
16 (1): (15-29)
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Strategy Compiling
Case Study: ZTE (A Chinese Telecommunication Co.)
Abstract
The goal of this paper is to compile strategies for a Chinese international
telecommunication vendor which entered into Iran telecom market in the year 2000.
Since ZTE is involved with business in more than 135 countries and it is out of our
power to collect huge data from all over the world, we have limited our strategies to
Iranian market and we will compile strategies for Iran business unit only.
To proceed with compiling strategies for ZTE Company, we will firstly give a brief
introduction about ZTE. Then we will give a short explanation about the method of
compiling strategies for any kind of firm. At the end, based on the method
introduced, we will select the most adequate strategies in order to maintain ZTE’s
competitive advantage in Iran telecom market.
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Strategy Compiling Case Study: ZTE (A Chinese Telecommunication Co.)
products are based on high technology and imported for China Unicom, with a capacity of up to 1.1
from world class level companies, this paper is million lines
focused on foreign actors in Iranian market only. Constructed the world's first Soft switch network
Main actors in Iran telecom market since the for China Netcom
establishment of telegraph and fixed telephone Ranked No. 3 in the 'Top 50 listed companies
lines have been: Siemens, Alkatel, NEC, Erksson, with greatest development potential' in China
and Italtel. Securities Journal-Asia Business magazine
After the appearance of mobile communication, 2003: Strategic emphasis on international
Nokia entered to this market as well. business, with the number of international
Up to year 2000, Siemens, Alkatel, NEC and marketing staff increased by over 100%
Eriksson have been dominating the Iran telecom 2004: Listed on the Hong Kong Stock Exchange
market for wired and transmission networks. as the first A to H listed Chinese enterprise
Since 1992 to 2000, three companies (Nokia, Provided telecoms services for the 2004 Olympic
Siemens, and Erickson) have been manipulating Games in Athens – ADSL system covered 16
Iran telecom market for mobile telecommunication. facilities throughout the event
With appearance of Chinese companies here, 2005: Ranked as one of the 'Top 100 Information
the actors on wired and wireless networks started to Technology Companies' by Business Week
lose their marketing share rapidly. Joined the league of global telecoms giants by
Following is a brief introduction to ZTE which teaming up with Alcatel, Ericsson, France Telecom
has succeeded to play an active role as a Chinese and Portugal Telecom
company in Iran telecom market. Became China's largest wireless equipment
1985-1996: Started transition to a multi-product provider with a global wireless capacity exceeding
R&D strategy, embracing wireless switching, 100 million lines.
transmission, access, videoconferencing and power ZTE overview: As one of the first Chinese
supply systems in 1996 telecoms equipment provider to pursue business in
Became the first Chinese telecoms equipment overseas markets, ZTE now has over 8000
provider to attain ISO9001 quality standard employees working around the world.
certificate in 1995 Since 1996, the company has provided its
1997: Listed on the Shenzhen Stock Exchange products and services to 135 countries and
in China regions, serving major telecoms operators in
2000: Launched the world's first CDMA Asia Pacific, South Asia, North America,
handset with detachable SIM card Europe, Latin America, Africa and the
16
Amini M. T.
Commonwealth of Independent States. Through The corporation has also launched joint laboratory
a combination of strategic marketing, partnerships with Texas Instruments, Intel, Agere
differentiation, cost advantage, human Systems, HHNEC, IBM, Microsoft (China),
Downloaded from eijh.modares.ac.ir at 13:31 IRDT on Monday June 24th 2019
resources and intellectual property Qualcomm, Huahong NEC and Tsinghua University.
management, ZTE has established firm The company has undertaken technological research
commercial partnerships with over 500 alliance projects with 50 academic institutions
1
operators around the world. [ ] throughout China, where ZTE is also a fully fledged
member of the China Communications
2. Research and Development Standardization Association (CCSA).
With more than 33% percent of the workforce
dedicated to R&D and with 10 percent of annual 3. ZTE Iran
revenues channeled to this field, ZTE has 16 R&D 2000: Entered to Iran telecom market introducing
centers and Institutes across North America, its fixed switching system to telecommunication
Europe and Asia. company of Iran.
International standards such as CMM and 2001: Introduced its Access and Transmission
CMMI are strictly applied across all ZTE R&D products to Iran telcom. Market.
management processes. Using these scientific 2002: Introduced its new designed product
management mechanisms and shared technology GSM-WLL as a rural telecomunication solution for
platforms, ZTE has standardized its R&D Iran telecom market.
processes, shortening R&D periods, reducing costs, 2003: Introduced its SMS products to Mobile
optimizing design flows and guaranteeing the Communication Company of Iran (MCCI).
performance of new products. 2004-2008: Succeded to sell more than 4.5
By the end of 2007, ZTE had applied for around million ports for switch and access products in 26
12000 national or international patents, 90% out of provinces. (15% of marketing share)
which are innovation patents with associated Succeded to sell 2 million ports of GSM-WLL
intellectual property rights. products in 15 provinces as wireless solution for
ZTE has established strategic cooperation rural areas. (65% of marketing share for WLL
agreements with leading telecoms giants such as products)
Portugal Telecom, France Telecom, Alcatel, ZTE’s total revenue from Iran telecom market
Ericsson and Nortel in NGN and mobile systems, on 2006 has exeeded $3 billion. ZTS’s Iran
with Hutchison in 3G, and with Marconi in optical branch is continuing to develope its market for
transmission systems. different products with its 120 (80 Iranian
engineers) sales and aftersales experts. [2]
17
Strategy Compiling Case Study: ZTE (A Chinese Telecommunication Co.)
External Factors
Evaluation
Internal Factors
Evaluation
* Reference: Fred R. David, “How Companies Define their Mission” Long Range Planning 22, No. 3 (June 1988): 40
18
Amini M. T.
vision is to set long range goals for ZTE in Iran Evaluation Matrix has become 2.59.
telecom market. 10. Internal Factors Evaluation
ZTE’s Goal for next 5 years is to increase its Internal factors are related to inside of the
marketing share to 35% in wired network organization and can be controled by
4
market and 20% in wireless network market. management. [ ]
ZTE will be the first company to create a new Strengths are those factors which can be
market for 3G wireless products in Iran. considered as advantages in comparison with
competitors, industry averages or past records
9. External Factors Evaluation of an organization. [5]
External factors are devided into general/macro If competitors fail to learn strength points of
environment and task/function/micro an organization, it means that the organization
environment. has succeeded on aquisition of competitive
Macro environment factors are those which advantage. [6]
indirectly influence organization’s activities. In the following table, we have classified
Micro environment factors are those groups or and listed possible internal factors. Then,
elements which can directly influence through a coefficiency, we have given a weight
1
organization’s activities. [ ] for each factor. In fact, the coefficiency is the
External factors evaluation can be weight of each factor in comparison with other
considered as a tool which is used by company factors. Therefore, the summation of all
to avoid shocks and to guarantee long-range coefficiencies under one culomn must be equal
2
security. [ ] to 1. [7]
In the following table, we have classified and
listed possible external factors. Then, through a
coefficiency, we have given a weight for each
factor. In fact, the coefficiency is the weight of
each factor in comparison with other factors.
Therefore, the summation of all coefficiencies
under one culomn must be equal to 1. [3]
4. Handbook of strategic planning. Dr. M. Arabi page 27.
5. Handbook of strategic planning. Dr. M. Arabi page 27.
1. Handbook of Strategic Planning. Dr. M. Arabi Page 15. 6. Handbook of strategic planning. Dr. M. Arabi page 27.
2. Handbook of Strategic Planning. Dr. M. Arabi Page 15. 7. Handbook of Strategic Planning. Dr. M. Arabi Page 15.
3. Handbook of Strategic Planning. Dr. M. Arabi Page 15.
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Strategy Compiling Case Study: ZTE (A Chinese Telecommunication Co.)
(4)Opportunity (excellent)
(3) Opportunity (typical)
Coefficient
Macro/Micro
environmental Main Factors
Factors
Potential Competitors Because of huge capital and high costs, it is not easy to enter to this Industry 0.02 1
1
Handbook of strategic planning. Dr. M. Arabi page 23
20
Amini M. T.
(4)Strength (excellent)
(3) Strength (typical)
Weakness (serious)
Coefficient
Internal Factors
(Strengths & Main Factors
Weaknesses)
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Strategy Compiling Case Study: ZTE (A Chinese Telecommunication Co.)
Evaluation Matrix has become 2.96. and internal factors, based on the method
11. Strategies in a View introduced above, we have to find ZTE’s
In general, strategy can be defined as systematic position in Iran telecom market.
classification of activities for aquisition of We have entered the sum total of the scores in
1
competitive advantage. [ ] the matrix and it seems the company’s position
Most of companies can select one or few of in Iran market should be an offensive attitude
following strategies depending on the based on strengths and opportunities.
conditions they face.
13. SWOT Analysis
1) Integration Strategies: An assessment of Strengths, Weaknesses,
1-1) Forward Integration Opportunities and Threats. SWOT analysis is
1-2) Backward Integration used within organizations in the early stages of
1-3) Horizontal Integration strategic and marketing planning. [3]
2) Intensive Strategies: After we have learned strengths, weaknesses,
2-1) Market Penetration opportunities and threats, we have to list them
2-2) Market Development in the SWOT matrix and suggest one or few
2-3) Product Development strategies for the organization. When
3) Diversification Strategies: suggesting, strategies we have related strength
3-1) Concentric Diversification points to opportunities, in order to select
3-2) Conglomerate Diversification offensive strategies, strengths to threats in order
3-3) Horizontal Diversification to suggest competitive strategies, weakness to
4) Cooperative Strategies: opportunities in order to suggest conservative
4-1) Cooperative Arrangements strategies and finally weaknesses to threats in
5) Retrenchment Strategy order to select defensive strategies.
6) Liquidation Strategy Following is the matrix for SWOT and
7) Combination Strategy [2] suggested strategies. Later, we will select the
best strategies using QSPM Matrix.
22
Amini M. T.
1 2 3 4 4
Total Grade of External Factors Matrix Evaluation
Conservative (WO)
Offensive (SO)
2
Defensive (WT) Competitive (ST)
Population Growth
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Strategy Compiling Case Study: ZTE (A Chinese Telecommunication Co.)
Relative Distribution of
Population
GNI
Cultural and
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Educational Level of
Society
New Products
International
Commerce Regulation
Western Countries
Political Pressure on
Iran for Nuclear
Activities
Rearrangement of the
world based on Energy
Resources
Appearance of New
Powers
Globalization of
Market and Economy
Low Number of sellers
Low number of
competitors
Threats
Cost of Energy
Governmental Budget
devoted to R&D
Total Budget devoted
to R&D
Transfer of Technology
and its condition
Tax/Custom Regulation
Western Countries
Political Pressure on
4) Cooperative strategy: Iran for Nuclear
Activities
4-1) Financial Cooperation with
Governmental
domestic companies (Letter of Credit
Regulation
method)
Exchange Rates
4-2) Long-term contracts with strategic Limited customers
suppliers ((Microsoft, Intel, IBM ...)
American Products
(Windows, Oracle…)
Domestic
Subcontractors (Tower,
Civil …)
Because of huge capital
and high costs, it is not
easy to enter to this
Industry
Rapid Growth of
Industry
Varieties of Products
14. Quantitative Strategic Planning Matrix Organizations spend a lot of time and effort on
(QSPM) strategy formulation. Often, there are several
Choosing the best strategic way forward different approaches or strategies that the
organization could follow. But how one makes
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Amini M. T.
decision? Which option is best? Do we rely on • The critical success factors of the
intuition, or take a more objective approach? business unit.
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Not surprisingly, we need to base our decision • The relative importance of each of
on facts, not gut feelings. But how do we do these critical success factors.
this, particularly when the effects of different • How one rates a particular strategy by
strategies can be so different? each success factor.
The Quantitative Strategic Planning Matrix These inputs are used to evaluate the relative
(QSPM) helps us address this question. It gives attractiveness of different strategies. This
us a systematic approach for evaluating relative attractiveness is expressed in terms of a
alternate strategies, and helps us decide which number, the "Sum Total Attractiveness Score".
strategy is best suited to our organization. The higher this score is, the more attractive the
Understanding the Matrix: strategy is....
QSPM is based on three primary inputs:
Table 5 QSPM Matrix and Relevant Scores Based on all Factors and Strategies
Strategy 1 Strategy 2 Strategy 3 Strategy 4
Key Factors
Weight
Weight
Weight
Weight
Score
Score
Score
Score
Total
Total
Total
Total
Strengths
Culture and Atmosphere 0.06 4 0.24 0.06 4 0.24 0.07 4 0.28 0.07 3 0.21
Method of Decision Making 0.06 3 0.18 0.06 3 0.18 0.07 4 0.28 0.07 3 0.21
Control System 0.04 3 0.12 0.06 3 0.18 0.05 3 0.15 0.07 3 0.21
Synergy 0.04 3 0.12 0.04 3 0.12 0.04 3 0.12 0 0 0
Familiarity with Customers
0.05 3 0.15 0.06 3 0.18 0.04 3 0.12 0 0 0
needs
After-sales Service 0.05 3 0.15 0.06 3 0.18 0.04 3 0.12 0 0 0
Cost Control 0.06 4 0.24 0.06 4 0.24 0.05 4 0.2 0.09 4 0.36
Operation Control (Planning,
0.05 3 0.15 0.06 3 0.18 0.04 3 0.12 0.09 4 0.36
Purchasing, Quality)
Costs and Technical
capabilities in comparison 0.06 4 0.24 0.06 4 0.24 0.04 4 0.16 0.09 3 0.27
with competitors
Research and Development 0.06 4 0.24 0.06 4 0.24 0.05 4 0.2 0.05 3 0.15
Effective Utility of
0.05 3 0.15 0.06 3 0.18 0.05 4 0.2 0.09 3 0.27
Subcontracting
Effective Utility of Internet
0.06 3 0.18 0.06 3 0.18 0.05 4 0.2 0.09 3 0.27
Network
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Strategy Compiling Case Study: ZTE (A Chinese Telecommunication Co.)
Continuous Training of
0.05 3 0.15 0.04 3 0.12 0.04 3 0.12
Human Resources
Weaknesses
Image, Reputation and
0.03 3 0.09 0.025 3 0.075 0.04 4 0.16 0.05 2 0.1
Quality of Product
Pricing Strategy 0.03 3 0.09 0.025 3 0.075 0.05 4 0.2 0.05 3 0.15
Marketing Share 0.03 2 0.06 0.025 2 0.05 0.04 2 0.08 0.05 2 0.1
Cost & obstacles of
0.03 2 0.06 0.03 2 0.06 0.05 3 0.15 0 0 0
Penetration
Price per Benefit 0.03 2 0.06 0.025 2 0.05 0.05 2 0.1 0 0 0
Efficiency of Cost and
0.03 2 0.06 0.025 2 0.05 0.03 2 0.06 0 0 0
Income
Cost and Availability of Raw
0.03 2 0.06 0.025 2 0.05 0.03 3 0.09 0 0 0
Material
Opportunities
GDP Growth 0.05 4 0.2 0.05 4 0.2 0.05 4 0.2 0 0 0
Money Supply 0.05 4 0.2 0.05 4 0.2 0.05 4 0.2 0 0 0
Export/Import 0.05 4 0.2 0.05 4 0.2 0.05 4 0.2 0 0 0
Change on Life Style 0.05 4 0.2 0.05 4 0.2 0.05 4 0.2 0 0 0
Population Growth 0.05 4 0.2 0.05 4 0.2 0.05 4 0.2 0 0 0
Relative Distribution of
0.03 3 0.09 0.04 3 0.12 0.03 3 0.09 0 0 0
Population
GNI 0.05 4 0.2 0.05 4 0.2 0.05 4 0.2 0.05 3 0.15
Cultural and Educational
0.03 3 0.09 0.04 3 0.12 0.03 3 0.09 0.05 3 0.15
Level of Society
New Products 0.035 4 0.14 0.04 4 0.16 0.05 4 0.2 0.05 4 0.2
International Commerce
0.035 4 0.14 0.05 4 0.2 0.04 4 0.16 0.04 4 0.16
Regulation
Western Countries Political
Pressure on Iran for Nuclear 0.05 4 0.2 0.05 4 0.2 0.05 4 0.2 0.06 4 0.24
Activities
Rearrangement of the world
0.05 4 0.2 0.05 4 0.2 0.05 4 0.2 0.06 4 0.24
based on Energy Resources
Appearance of New Powers 0.05 4 0.2 0.05 4 0.2 0.05 4 0.2 0.04 4 0.16
Globalization of Market and
0.05 3 0.15 0.04 4 0.16 0.04 4 0.16 0.04 4 0.16
Economy
Less Sellers 0.04 3 0.12 0.04 3 0.12 0.04 3 0.12 0.05 4 0.2
less Competitors 0.03 3 0.09 0.04 3 0.12 0.04 3 0.12 0.05 4 0.2
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Amini M. T.
Threats
Cost of Energy 0.03 2 0.06 0.02 2 0.04 0.02 2 0.04 0 0 0
Governmental Budget
0.03 2 0.06 0.02 2 0.04 0.02 2 0.04 0 0 0
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devoted to R&D
Total Budget devoted to
0.03 2 0.06 0.02 2 0.04 0.02 2 0.04 0 0 0
R&D
Transfer of Technology and
0.02 2 0.04 0.02 2 0.04 0.02 2 0.04 0.025 2 0.05
its condition
Tax/Custom Regulation 0.01 2 0.02 0.02 2 0.04 0.02 2 0.04 0.025 2 0.05
Western Countries Political
Pressure on Iran for Nuclear 0.015 2 0.03 0.02 2 0.04 0.02 2 0.04 0.025 2 0.05
Activities
Governmental Regulation 0.03 2 0.06 0.02 2 0.04 0.02 2 0.04 0.025 2 0.05
Exchange Rates 0.02 2 0.04 0.02 2 0.04 0.02 2 0.04 0.025 2 0.05
Limited customers 0.02 2 0.04 0.03 2 0.06 0.02 2 0.04 0.5 2 1
American Products
0.02 2 0.04 0.02 2 0.04 0.02 2 0.04 0.025 2 0.05
(Windows, Oracle…)
Domestic Subcontractors
0.02 3 0.06 0.02 3 0.06 0.02 3 0.06 0 0 0
(Tower, Civil …)
Because of huge capital and
high costs, it is not easy to 0.025 2 0.05 0.02 2 0.04 0.02 2 0.04 0.025 2 0.05
enter to this Industry
Rapid Growth of Industry 0.015 2 0.03 0.02 2 0.04 0.02 2 0.04 0.025 2 0.05
Varieties of Products 0.015 2 0.03 0.02 2 0.04 0.02 2 0.04 0.025 2 0.05
Results
Strategy 1
6.33
Marketing Strategy: New Product New Market
Strategy 2
6.51
Strategy of Marketing Share Development: Diversification on Products and Decrease on Costs
Strategy 3
6.67
Strategy of Penetration into the Market: using Political Opportunity
Strategy 4
Cooperative Strategy: 6.44
(Letter of Credit & Long-Term Contracts with strategic suppliers)
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Strategy Compiling Case Study: ZTE (A Chinese Telecommunication Co.)
The best strategies based on QSPM model for [8] Arabi, Mohammad, “Handbook of Strategic
ZTE’s Iran business unit is: Planning Pages (15, 23, 27, 28)”. Tehran,
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1
ﻣﺤﻤﺪ ﺗﻘﻲ اﻣﻴﻨﻲ
ﻫﺪف اﻳﻦ ﻣﻘﺎﻟﻪ ﻋﺒﺎرت اﺳﺖ از ﺗﺪوﻳﻦ اﺳﺘﺮاﺗﮋي ﺑﺮاي ﻳﻚ ﺷﺮﻛﺖ ﺑﺎزرﮔﺎﻧﻲ ﺑﻴﻦ اﻟﻤﻠﻠﻲ ﭼﻴﻨﻲ ﻛﻪ در ﺳﺎل
2000وارد ﺑﺎزار ﻣﺨﺎﺑﺮات اﻳﺮان ﺷﺪه اﺳﺖ.
از آﻧﺠﺎﻳﻲ ﻛﻪ ﮔﺴﺘﺮه ﻓﻌﺎﻟﻴﺖ ﺷﺮﻛﺖ ZTEﺑﻴﺶ از 135ﻛﺸﻮر را در ﺑﺮ ﻣﻲﮔﻴﺮد و ﺟﻤﻊ آوري اﻃﻼﻋﺎت
ﺣﺠﻴﻢ از ﺳﺮﺗﺎﺳﺮ ﺟﻬﺎن ﺧﺎرج از ﺗﻮان ﻣﺎ ﻣﻲﺑﺎﺷﺪ ،از اﻳﻦ رو ﺗﺪوﻳﻦ اﺳﺘﺮاﺗﮋي را ﺑﻪ ﺑﺎزار اﻳﺮان ﻣﺤﺪود ﻛﺮدهاﻳﻢ
و ﻓﻘﻂ ﺑﺮاي واﺣﺪ ﻛﺴﺐ و ﻛﺎر اﻳﺮان ﺗﺪوﻳﻦ اﺳﺘﺮاﺗﮋي را اﻧﺠﺎم ﺧﻮاﻫﻴﻢ داد.
در راﺳﺘﺎي ﺗﺪوﻳﻦ اﺳﺘﺮاﺗﮋي ﺑﺮاي ﺷﺮﻛﺖ ،ZTEاﺑﺘﺪا ﺷﺮﻛﺖ ZTEرا ﺑﻄﻮر ﻣﺨﺘﺼﺮ ﻣﻌﺮﻓﻲ ﺧﻮاﻫﻴﻢ ﻧﻤﻮد.
ﺳﭙﺲ ﺷﺮح ﻛﻮﺗﺎﻫﻲ در ﺧﺼﻮص ﻧﺤﻮه ﺗﺪوﻳﻦ اﺳﺘﺮاﺗﮋي ﺑﺮاي ﻫﺮ ﻧﻮع ﺷﺮﻛﺖ ﺧﻮاﻫﻴﻢ داد .در ﭘﺎﻳﺎن ﺑﺮ اﺳﺎس
ﻣﺘﺪ اراﺋﻪ ﺷﺪه ﻣﻨﺎﺳﺐ ﺗﺮﻳﻦ اﺳﺘﺮاﺗﮋﻳﻬﺎ را ﺑﻪ ﮔﻮﻧﻪاي ﻛﻪ ﻣﺰﻳﺖ رﻗﺎﺑﺘﻲ ﺷﺮﻛﺖ ZTEدر ﺑﺎزار ﻣﺨﺎﺑﺮات اﻳﺮان
ﺣﻔﻆ ﺷﻮد ،اﻧﺘﺨﺎب ﺧﻮاﻫﻴﻢ ﻧﻤﻮد.
واژﮔﺎن ﻛﻠﻴﺪي :ﻣﺎﻣﻮرﻳﺖ ،ﭼﺸﻢاﻧﺪاز ،اﻫﺪاف ﺑﻠﻨﺪﻣﺪت ،اﺳﺘﺮاﺗﮋي ،ﻣﺰﻳﺖ رﻗﺎﺑﺘﻲ) EFEM ،ﻣﺎﺗﺮﻳﺲ
ارزﻳﺎﺑﻲ ﻋﻮاﻣﻞ ﺧﺎرﺟﻲ() IFEM ،ﻣﺎﺗﺮﻳﺲ ارزﻳﺎﺑﻲ ﻋﻮاﻣﻞ داﺧﻠﻲ() SWOT ،ﻧﻘﺎط ﻗﻮت ،ﺿﻌﻒ،
ﻓﺮﺻﺘﻬﺎ و ﺗﻬﺪﻳﺪﻫﺎ() QSPM ،ﻣﺎﺗﺮﻳﺲ ﻛﻤﻲ ﻃﺮاﺣﻲ اﺳﺘﺮاﺗﮋي(
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